How Our Government Is Killing Americans' Business Prospects Abroad -- And At Home
Meet the Foreign Account Tax Compliance Ac. It's not a new tax -- it's a new reporting requirement for overseas financial accounts...backed by heavy fines. McGurn writes in the WSJ:
It requires foreign financial banks, investment houses, insurance companies, etc. to identify any Americans among their customers and turn over information about their accounts to the IRS (or to the local government, if that country has a sharing agreement with Uncle Sam).At the individual level, Americans are now required to report foreign accounts at thresholds beginning at $50,000. Failure to file, or filing incorrectly, means a heavy fine. Among the most wicked aspects of this legislation is that a taxpayer can rack up tens of thousands of dollars in fines even if he or she doesn't owe the IRS a dime in actual taxes.
...A woman emailing this reporter from Sweden says she's been shut out of a promising Information Technology partnership since the chief investor learned that having an American on board would mean opening the partnership's books to the IRS.
On this side of the Atlantic, Joe Green, chairman of Canada's Democrats Abroad, announces a website (ExpatStory.us) where Americans can post their horror stories anonymously. In testimony at IRS hearings on Fatca in April, Mr. Green cited another example of the price U.S. expats are paying: American executives with foreign companies who "are being refused a promotion because it puts the company in a vulnerable position."
Thus far, these and similar anecdotes have gained little public attention. Partly this is because the affected group--the roughly six million Americans living overseas--is much smaller than those who are directly affected by, say, the president's Affordable Care Act. For most Americans, the negative consequences of Fatca are highly abstract.
More on this at reason, by Matt Welch. He notes that FATCA is causing problems for a Swiss company creating jobs in Ohio:
Because of the populist, economically illiterate Foreign Account Tax Compliance Act, Swiss citizens working in the United States at American-job-creators like Weatherford are being unceremoniously dumped by their banks back home. Imagine for a moment going to your ATM to pull out money, and seeing the message "account closed." I have talked to multiple Swiss expatriates and bankers alike who say that that's now commonplace.Why should we care about a bunch of goddamned fondue-eating Novartis executives? Switzerland was by several accounts the largest source of foreign direct investment into the United States in 2010 [PDF], and is consistently among the top foreign investors in the presumably Ohio-friendly field of manufacturing. The Swiss government estimates that Swiss companies employ a half-million Americans.
So we are now actively infuriating not only some of the roughly five million American expatriates who are seeing their bank accounts shuttered all over the globe, but also the very type of job-creating Swiss investors and executives to whom a prudent country might be a tad more welcoming. As this Congressional Research Service report [PDF] puts it, "Foreign direct investments are highly sought after by many state and local governments that are struggling to create additional jobs in their localities." Do tell.
More on this by Matt here, about the sort of person who has a Swiss bank account...or, soon, will have had one:
My wife used to work freelance for various Swiss media outlets, and we were happy to save on wire-transfer and exchange-rate costs by having the money deposited directly into a local bank. Just last week we stopped by the bank to pull out some walking-around money, and were told we would likely have to shut the account down because of FATCA. Only some sensitive negotiation stayed the execution, but who knows for how long; a Swiss banker friend told me later in the day that his company is simply pulling the plug on all U.S.-related business.
Oh, yes. I am an American who has lived in Switzerland for about 20 years now. The reporting requirements for American accounts are now so onerous that banks no longer want us as customers.
As I understand it, there is no legal method for the US to impose reporting requirements on foreign banks - theoretically, the banks could just tell the US where to stuff it. Hence, these requirements are more-or-less enforced via blackmail: do what we want, or we will cut your bank off from American securities markets.
The result: Since I intend to remain in Switzerland, I am essentially being forced to renounce my American citizenship. This seems to be the only way forward.
bradley13 at July 17, 2012 12:48 AM
Empires were ruled by Emperors, Kingdoms were ruled by Kings. We now live in Countries ruled by...
Goo at July 17, 2012 5:21 AM
A bit of background on this issue may be useful. The reporting requirements are intended to crack down on a surprisingly easy (and already illegal) form of tax evasion.
For quite a few years now, quite a few self-employed people with high incomes have set up overseas accounts. They have business profits deposited directly into these accounts with no taxes withheld. They then get a debit card on that account which is used to make purchases. As long as your card has a Visa or MasterCard logo on it, merchants don't care that it was issued by a bank in the Caymans or some other offshore banking haven.
The vast majority of people who have offshore accounts (like me) have them for perfectly legitimate reasons and are not criminals. The reporting requirements are intrusive, but in my experience have not been onerous. My tax preparation software generates the letters automatically and I just need to mail them to the Treasury. It sounds like bradley13's experience has been very different, but this is nothing I would consider renouncing US citizenship over.
Factual Interjection at July 17, 2012 8:38 AM
Ten years, maybe, we'll last. Then we get taken over by somebody stronger (which at this point is just about everybody - probably some multinational will just buy us out). We have, and are continuing to, sell our country out to the rest of the world, for PROFIT! Soon, there'll be nothing left in our hands, and with stupid stuff like this and the "Intellectual Property" fiasco, we're making enemies much faster than friends.
davnel at July 17, 2012 11:49 AM
This reminds me of the tariffs that were enacted in the 1920s that helped create the depression.
Bill O Rights at July 18, 2012 12:55 PM
Once again, the big government Democrats in Congress have instituted a big brother scheme that has had the unintended effect of foreign banks and companies refusing to do business with U.S. citizens or hire U.S. expats because they don't want interference from the U.S. government that comes as the result of FATCA. How many more U.S. citizens will be soon renouncing their U.S. citizenship?
Sad Expat at July 22, 2012 3:17 PM
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